The Fiscal Responsibility Act makes it mandatory for the Federal Government to prepare a Medium Term Expenditure Framework every year. It is an integrated economic and fiscal strategy plan that sets out the macro-economic framework and its projections and underlining assumptions for the next three financial years and an evaluation and analysis of the projections for the preceding three financial years. It contains the fiscal strategy paper, a revenue and expenditure framework, a consolidated debt statement and a statement describing the nature and fiscal significance of contingent liabilities and quasi fiscal activities of government. The MTEF 2015-2017 is stated to be anchored on the need to strengthen macro-economic fundamentals, structural reforms, good governance and institutions as well as investing in priority sectors. The idea is to diversify and strengthen linkages in the economy, improve revenue generation, prudently manage revenues, create jobs, sustain inclusive growth and build infrastructure.
By a letter dated September 30, 2014, and received in the office of the Senate President on October 2, 2014, President Goodluck Jonathan submitted the MTEF 2015-2017 to the National Assembly for its consideration and approval. As has been the norm in previous years, the MTEF is getting to the National Assembly three months after it should have been endorsed by the Executive Council of the Federation. The FRA by Section14 (1) requires the Minister of Finance, before the end of the second quarter (June), to submit the MTEF to the Executive Council for its consideration and endorsement. By the spirit of the FRA, it should have been submitted to the National Assembly by the first week of July, before its legislative vacation and the lawmakers should have approved the same before their vacation so as to pave the way for the timely preparation of the 2015 federal budget.
Instructively, the 2015-2017 MTEF, like its predecessor, is not anchored on any national planning framework. Since the expiry of the First National Implementation Plan of Vision 20:2020, the preparation of the Second National Implementation Plan has been stuck in the mud of bureaucracy. In the later tradition of the Ministry of Finance, the MTEF was prepared without consultations with stakeholders either in the private sector or in the civil society. Indeed, the document is not available on the website of the Budget Office of the Federation or that of the Ministry of Finance. So, the intention of the Minister of Finance, Mrs. Ngozi Okonjo-Iweala, who is charged by the FRA with the preparation of the MTEF, is to keep it away from “meddlesome interlopers” who have no business with a fiscal policy that would affect their lives. The MTEF did not also show the allocations to the sectors over the medium term.
The usual turf war between the executive and the National Assembly is on the benchmark price of crude oil. In the past, the latter usually insists on increasing the benchmark price recommended by the Executive. This time around, the Executive proposes $78per barrel for 2015. But oil prices have been on the decline of late oscillating between $80 and $90 per barrel. With moderate projections for economic growth in both developing and developed countries and increased production of shale oil by the United States, the demand of crude oil has not been as high as in previous years. The projection stated that it was based on 15 and 10 year moving averages deploying the Autoregressive Integrated Moving Average model. The MTEF also stated that it took cognisance of increasing global supply and the need for caution in revenue projections given the volatile nature of oil prices and the need to rebuild our fiscal buffers in arriving at the benchmark price. However, in the light of recent price trends and economic forecasts, the $78pb projection of the Executive is unrealistic. It may lead to a situation where the budget will crash and become un-implementable if crude oil sells below the benchmark price. This will also lead to little or no savings accruing to the reserve Excess Crude Account thereby increasing the chances of a fiscal crisis. It is thus imperative that in approving the MTEF, the National Assembly should reduce the benchmark price.
The projection of a production volume of 2.2782mbpd, lower than the 2.3883 mbpd programmed for 2014 due to lack of new investments in the oil sector flowing from the delay in passage of the Petroleum Industry Bill is an indictment on the National Assembly that has been playing politics with the bill. Such a bill of critical national importance should not have been unduly delayed by a legislature that understands its role in national development. With the elections scheduled for February, it may be difficult for the National Assembly to pass the bill before the end of its tenure. Even if the members of the National Assembly disagree with certain provisions of the bill, this is not a sufficient reason to sit on the entire bill and obviously deny the nation of new investments and accruing revenue in the new fiscal framework.
The revenue and expenditure statement for the half year 2014 which backgrounds the projections for 2105 is a bit depressing. The oil and non oil revenue fell short of projections as only N1.552trillion which is 83.23 per cent of prorated revenue projections were realised. Oil production averaged 2.25mbpd. In terms of expenditure, the recurrent side is doing well while capital expenditure suffers. Out of the N1.135tn budgeted for capital expenditure, only N410bn has been released by the end of the second quarter while only N226.97bn which is less than 20 per cent of the approved capital budget had been utilised as of July. At this rate, we may end up utilising less than 40 per cent of the capital budget. The expectation was that if accrued revenues were only 83.23 per cent of projections, capital expenditure should have done not less than 83 per cent of the prorated half year appropriations.
With the mantra of increasing diversification and strengthening linkages in the system, it was surprising that the MTEF has nothing on adding value to our crude oil before export or improving local petroleum refining capacity. It contains nothing on reducing fuel subsidy payments. Does it mean that the government is at the end of its thinking capacity on the subject? A mere statement that government will develop the solid minerals sector including strategic minerals of coal, gold, bitumen, iron ore, livestock limestone, lead/zinc and barites without stating any details of an intervention strategy is a carry-over from previous MTEFs. A country with so much potential is unable to tap them and transform potential into actual sources of job and wealth creation.
With the outset of politics towards 2015, it appears that governance has been relegated to the background and Nigerians are no longer asking questions about budgetary and economic management. We cannot afford to sweep the MTEF under the carpet. The National Assembly has a duty to scrutinise the provisions and make the necessary corrections before its approval. The fact that legislators will be at the political party primaries and campaigns thereafter should not be an excuse for abdication of a public duty. Between the executive and the National Assembly, the fact that elections are coming up in 2015 should have reminded them of the need to present and approve the MTEF and the 2015 budget earlier in the year.
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